The Trouble with Harry

Senator Thomas J. Walsh of Montana bent over the library table and peered down at witness Harry Ford Sinclair, “I wish you would tell us about a contract you made touching the Teapot Dome scandal.” Sinclair whispered into the ear of his attorney, regarded his reply, and turned toward his inquisitor. A bulky, some would say strongly built, man—with his slightly oversized head topped by the fedoras of the day, and his frame girded with the expensive suits suited to a man of his stature—he merely scoffed. Then, with the swagger of a Clan MacGregor tossing an enemy’s head onto a battle pitch, Sinclair squared up and said, “Senator, I decline to answer your impertinent question.”

Impertinent, maybe, but the Senator held the cards. It was March 1924, and Sinclair was sitting before the Senate Committee on Public Lands. They asked ten questions regarding his suspect behavior uncovered during his acquittal in an earlier fraud trial involving a felonious Secretary of the Interior. Harry remained smug, knowing that back home, all those oil pumpers in the Midcontinent field were making him millions. Sinclair was equally at home doing vodka shots with Russian czars and strolling oil derrick grime. But he did not coddle or cotton.

His respect for the United States Senate was contentious. A year earlier, a New York Times front page headline in January, 1923 declared, “Sinclair Refuses Records to Senate; Oil Man Defies the La Follette to Delve into His Private Affairs. Fine and Prison Possible.”

“Will you produce the records and books called for?” demanded Senator Robert La Follette of Wisconsin. “I will discuss the matter with my counsel and let you know later on,” replied Sinclair, who was smiling despite the tenseness of the situation. He told the legislators, “I will go to the Supreme Court, if necessary,” before submitting information about transactions he held personal and beyond the committee’s interest. Sinclair walked out of the committee room, suddenly ending the investigative session.

After two hours, Sinclair remained sequestered in a private room of the Senate wing with his attorneys—chief counsel J.W. Zevely of Washington, G.T. Stanford of New York, and Judge A.N. Chandler of Tulsa. With time approaching the five o’clock bell, committee chairman La Follette issued a subpoena via the Sergeant-at- Arms. Sinclair and his legal team returned to the chambers shortly after the committee adjourned. La Follette “refused to say whether Mr. Sinclair would be judged in contempt and thus made liable to fine or imprisonment or both.”

Sinclair was willing to roll the dice.

Harry Sinclair gambled the family drugstore to finance an oil lease and lost. Penniless, he shot his toe hunting rabbits, had it amputated, and collected $5,000 from an insurance claim. Some say he did it on purpose, while Harry said it made for a good yarn.

Oil derrick foundations needed timber. Sinclair used his coverage proceeds to buy lumber, selling it to the wildcatters who constructed pyramid-shaped structures on the oil patches springing up in the Mid-Continent fields of southeast Kansas. He learned that, with little risk, he could turn a small investment into a big dividend. With that, 21-year-old Harry Ford Sinclair was in the oil business.

Early in his career, Sinclair attracted the attention of wealthy speculators like Chicago meatpacker J.M. Cudahy, Pittsburgh capitalist Theodore Barnsdall and James F. O’Neill, president of Prairie Oil Company, a subsidiary of John D. Rockefeller’s Standard Oil of Kansas. Unlike his backers, Sinclair came from humble beginnings.

Sinclair was born in 1876 near Wheeling, West Virginia. The federal census of 1880 lists his father, John Sinclair, as a druggist and his mother, Phoebe, a housewife. The family headed west when Harry was young, settling in Independence, Kansas. John opened a drug store intending that his son become part of the family business. To that end, Sinclair graduated from The University of Kansas with a pharmacology degree. But oil proved to be a more seductive drug.

Banks more familiar with farmers, ranchers, and merchants were reluctant to fund black-gold prospecting. Sinclair realized that, at least in the short run, he needed to finance his own deals. After a decade spent prowling for undervalued oil leases across Kansas and Indian Territory, Harry hit it big with a strike in the rich Kiowa field that made him a millionaire before his thirtieth birthday.

When oil blew in 1905 at the farm of Ida Glenn south of Tulsa, Sinclair raced there from Independence and snatched up premium leases before prices rocketed. News spread of the bountiful Glenn Pool, and the place grew thick with wells and “corner shooters” who leased up property adjacent to a producing lease, usually on the corners, in order to leech from the known pool or formation. The magnitude of oil that arrived at the surface presented huge storage issues. “Get it fast and get it first” was the mantra—and figure out what to do with it later. Lease operators like the Sinclairs pumped crude into hastily constructed storage tanks and large, earthen, environment-be-damned lakes. Oil fouled streams and underground aquifers. Tank farms frequently burned, creating Red Adair-style fire hazards. Corner shooters and the “rule of capture” reigned—seven years later, the Glenn Pool was dry. But not before Harry Sinclair made millions.

The territory gushers ushered in an era of big banking. Lew Wentz, the Phillips brothers, Harry Sinclair, and a host of other wealthy oilmen believed banks to be sound investments. The effect of the oil industry working in concert with financial institutions was to create staggering economic growth. Yet there were periods of banking turmoil.

The young, restless Oklahoma economy rose and fell with the volatile price of crude. Lax regulations permitted banks the risky business of acquiring smaller banks. If economic conditions or poor management caused a subsidiary bank to suffer from depositor panic, mass withdrawals were a deathblow, resulting in a negative ripple effect on the consumer confidence of the owner bank. Wildcatter E.F. Blaise formed the oil-industry- friendly Farmer’s National Bank of Tulsa in 1903. Subsequently, Farmer’s bought the Kiefer State Bank that sprung up close to the Glenn Pool.

The Kiefer bank failed in February 1910. Feeling the onslaught of withdrawals from the Exchange stimulated by the Kiefer collapse, Blaise and his wildcatting business partner, Tulsa attorney C.J. Wrightsman, called an emergency, nighttime meeting of selected Tulsa oilmen for later that day. No sooner had the men exited the room did Sinclair, P. J. White, James Chapman, and Robert McFarlin buy Farmer’s, changing its name to Exchange National Bank and installing Sinclair as the new president. Harry Sinclair was now a bank owner. The chief counsel for the Exchange National bank was Joseph L. Hull Sr., the grandfather of Tulsa entrepreneur and attorney Joe Hull III. His office on Cheyenne Avenue sits across the street from the site of Sinclair’s Tulsa residence. “The interesting thing about grandpa,” Hull said, leaning back into his leather chair, looking out his office window, “was that he was blind, blinded by an optic nerve disease that today would easily be treated with antibiotics. He had a reader and learned Braille.” His grit was a perfect match for Sinclair.

As Farmer’s National, it was the most influential bank in Oklahoma; under new management, Exchange survived from an unprecedented policy of personally guaranteeing each dollar deposited. But the challenges of the Great Depression brought hard times. Thankfully, the onus of guaranteed deposits ended with the passage of the far-reaching Glass–Steagall Act of 1933 that, among other things, protected depositors and restricted the speculation arm of banks from owning other financial institutions. (The act was ultimately repealed in 1999.)

Undeterred, Sinclair, Chapman, and others reorganized the Exchange National Bank as the National Bank of Tulsa in 1933, establishing its global reputation as the “The Oil Bank of America.” Enlarging the 1917 construction of the ten-story Exchange building, the elaborate National Bank edifice included a dirigible mooring at the top of its middle section. Years later, the landmark building at 320 S. Boston became the Bank of Oklahoma. One block east of the Exchange was a luxurious counterpart.

Any deal worth doing was done in the Hotel Tulsa built in 1912 at 3rd and Cincinnati. The fifth floor was Sinclair’s lair. He commuted daily via train from Independence for all-night poker games, whiskey drinking, and deal making—including the formation of the Sinclair-White Oil Company. But the Exchange Bank and the Oklahoma oil fields proved too small for the big nature of Sinclair. He headed for New York. Firmly planted, his new address granted him immediate access to the power brokers.

In the fall of 1916, after meeting with Wall Street investors and attorneys, Sinclair announced a $50 million deal: the consolidation of 500 miles of pipelines, big-capacity refineries, the Cudahy marketing facilities, and personal control of 532 wells with the potential to produce 5.5 million barrels of oil a year. Sinclair borrowed another $20 million to procure undervalued assets in the Mid-Continent. Sinclair Oil and Refining Company secured a charter “in perpetuity” from New York State on May 1, 1916.

Sinclair maintained his presence in Tulsa by building the eight-story Sinclair building at Fifth and Main streets, circa 1919, plus the brick home at 1730 S. Cheyenne for his wife Elizabeth and two children, in the shade of the Creek Council Oak tree.

Located just outside the surveyed city limits of Tulsa on what was formerly Lochpoka’s ceremonial square, Sinclair, his brother Earl who handled many of Sinclair’s business finances—Josh Cosden and others made quick order of greatly undervalued lots of a former Creek allotment purchased by important Tulsa real estate developer Grant Stebbins from the heir of Wehiley Neharkey. Years later, his multi-story mansion would fall to make way for an upscale condominium complex, but in its day Sinclair was big—big enough to threaten Rockefeller.

Oilman Edward Doheny became his intimate friend. He shared with Sinclair the mechanics of doing business in New York and Washington D.C. In 1921, Doheny confidentially bragged he had his son deliver $100,000 in a little black bag to Interior Secretary of State Albert Hall, greasing the awarding of a no-bid lease of the fertile Elk Hill, a wealth of California oil reserves owned by the federal government.

The success of Doheny’s business tactic encouraged Sinclair, who learned of a no-bid lease opportunity for the federal Teapot Dome in Wyoming, a federal reserve set aside for use by the United States naval fleet. The reserve was named after a desolate, windblown expanse in Wyoming whose landscape featured a rock vaguely resembling a teapot. Sinclair sent a deliveryman to Secretary Fall’s office armed with $200,000 in a handbag, along with his best regards to the 1920 presidential campaign of Warren G. Harding. The lease went to Sinclair, and his company spent $35 million dollars on the operation.

Interior Secretary Fall had been indicted for fraud as a result of his black-bag transactions with Doheny and Sinclair, who were subsequently and similarly charged. Fall was convicted—the first felony for a public federal official while in office. After a lengthy trial, Doheny was acquitted. During the three years between being charged with fraud and his trial, Sinclair continued directing his empire.

His first trial was declared a mistrial when it was exposed that Sinclair had hired detectives to follow jurymen. A second trial resulted in his acquittal, but a United States Senate committee would not let go of the jury-shadowing incident. The entire ordeal dragged out seven years. Not one to hide behind the Fifth—the due process amendment to the Constitution regarding self-incrimination—Sinclair testified before twelve separate legislative committees. On advice of counsel, he failed to answer one question—they reasoned it irrelevant regarding another man’s testimony concerning the Teapot Dome investigation, which was already in the Congressional records—and it cost him.

That omission landed Sinclair in the Washington D.C House of Detention, guilty of contempt of the Senate. With subsequent appeals to the Supreme Court unsuccessful, Sinclair served six and a half months in 1929.

Robert L. Owen, a Muskogee native, served Oklahoma as a United States Senator during the time of the Teapot Dome lease and investigation. Responding to a written request by Harry Rogers of the Exchange National Bank, asking for his views on the merit of the suits brought against Sinclair, the Owen wrote a lengthy review in the equally lengthily titled Remarkable Experiences of H. F. Sinclair with His Government: Some Dangerous Precedents:

“As a witness, Sinclair had been denied the right to have the constitutionality or pertinence of a question determined before punishment can be imposed upon him for refusal to answer. He was given six months in jail for criminal contempt of court, for an act in which he violated no law of Congress, no law of the United States, no existing rule of court, for an act, which had been practiced by the government and private individuals for 30 years.”

Sinclair got out in November 1929 just in time for the advent of the Great Depression and a tempest in Oklahoma. “I was railroaded to jail in violation of common sense and common fairness,” he shouted, storming out of the detention facility, continuing, “I cannot be contrite for sins for which I know I have never committed.”

An early post-detention business move involved Sinclair selling his pipeline subsidiary to his rival, Standard Oil Company, to have ready cash for buying flagging companies. The Sinclair group grew substantially during 1930-1936, acquiring companies and properties for pennies on the dollar.

“Oklahoma oilmen avoided control by the government which was seen as unwarranted interference with their liberties,” said Bruce Niemi, author of The Greatest Individual Act, with Sinclair squaring off against Governor “Alfalfa Bill” Murray in 1930-1931. The oil industry overproduced the Mid-Continent Oil Province during the 1920s in an atmosphere of inter-industry cooperation or “associationalism,” thus depressing petroleum prices.

As the issues became worse, the governor took dead aim at Sinclair and his fellow producers, threatening to shut down most Oklahoma wells so that production would cease for a period of time, allowing for prices to improve, and creating more tax money for the state’s education program. Challenged by the threat of an oilmen injunction, Murray erupted, “It’ll be like a jackrabbit trying to tree a wild cat.”

Niemi claims, “Alfalfa Bill drove Sinclair out of Oklahoma,” chasing him to his mansion on Long Island. Undaunted, his uncompromising spirit continued to drive his company in new directions with continued success. He was a walking poster child of American business swagger.

Sinclair netted $81 million in 1948, producing nearly 40 million barrels of crude. It was time to rest. He retired in 1949 at the age of 73. Never relinquishing his personal or corporate independence, he walked away from an enterprise worth $700 million dollars, nearly 100,000 stockholders and 21,000 employees. Sinclair died in Pasadena, California seven years later. Many were surprised at the death notice of the legend. They thought he was already gone.